Environmental, Social, and Governance (ESG) issues are now seen as a key risk to investments in aviation, and authorities across the world are demanding more transparency and stricter reporting standards. It’s never been more important to understand the pathways to net zero emissions, and their real-term impacts on all key players across the industry. Each month, IBA’s ESG Consulting team share key insights and the latest news from the growing world of sustainable aviation.
Clément Beaune, France’s Transport Minister, stated he intends to propose a minimum flight price policy to the EU with the hope that this will be a deterrent to consumers and therefore achieve a carbon reduction. Acknowledging that air travel can be cheaper in comparison to rail transport, Minister Beaune advocates for a price floor under commercial aviation to subsidise trains. This has received backlash from aviation stakeholders like Ryanair’s Chief Executive, who has previously described airline ticket price controls as ‘North Korea-like rate control’. Environmentalists argue increasing ticket costs is not a sound solution to emission mitigation in the aviation industry. A price increase is unlikely to stop frequent and high socioeconomic travellers. Frequent flyers are disproportionately responsible for emissions with 2% of French flyers accountable for 50% of France’s aviation emissions. In May this year, France placed a ban on some short-haul domestic flights, but due to caveats such as trains not running late enough, the ban only applied to 3 routes. Despite the acknowledgement and efforts to mitigate emissions from the French aviation sector, methods for material reductions are yet to be put in place – this is also applicable for global aviation. Train subsidies are important for motivating travellers to opt for a more sustainable alternative. Whilst we are awaiting the increase in Sustainable Aviation Fuel supply and other innovative reduction methods, IBA agrees that a frequent flyer levy may be a more impactful method of emission mitigation - where there is sufficient public transport to support travel.
The Association of Asia Pacific Airlines (AAPA) has called upon Governments to come together to catalyse global sustainable aviation. The association noted there are currently not industry standard solutions and policies, and certain regions are falling behind in the race to achieve net zero. For example, AAPA highlighted that facilities for producing Sustainable Aviation Fuel (SAF) are severely lacking in the APAC region in comparison to other regions, notably Europe and the U.S. The industry cannot be ‘half sustainable’ and market leaders like Europe and the U.S. are urged to unite to develop solutions that are applicable to other regions in a global manner. This comes after the European Union (EU) backs clean jet fuels in Africa under its Global Gateway infrastructure fund. The EU has pledged to dedicate half of its USD324 infrastructure plan to Africa to increase SAF production on the continent. Africa has vast amounts of under-utilised agricultural land; therefore, the EU sees great potential in the region. However, establishing a feedstock supply in Africa where there is inadequate infrastructure may be a challenge, alongside absent regulations. While APAC is lagging behind other regions, there is some SAF production, use and future agreements put in place such as in Singapore, India, and Japan, in comparison to Africa where there is none. IBA agrees that global standardisation of policy is needed, and hopes that at ICAOs Conference on Aviation and Alternative Fuels in November, more progressive responses to these issues will be made.
Europe and the U.S. have emerged as market leaders in sustainable aviation, particularly in the production and use of SAF, so it is encouraging that countries extending beyond these regions are emerging as key players. Boeing says that Brazil has the potential to be a top global contender in the SAF industry. Currently, SAF is made largely from municipal solid waste (MSW). With Brazil being one of the world’s largest agricultural producers, it has a large source of feedstock suitable for use in the alcohol-to-jet SAF conversion pathway, including ethanol made from sugarcane or corn. Alongside feedstock availability, Boeing recognises Brazil’s technical capacity and workforce accessibility, all of which could contribute to the acceleration of aviation decarbonisation. However, Brazilian airline GOL highlighted that while SAF supply is an urgent matter, demand will remain low if prices are still approximately three times higher than conventional jet fuel. On top of this, simulating the necessary investments for the ramp-up of SAF is a challenge. This falls to the lack of competitiveness to conventional jet fuels. There is no compensation mechanism for the use of SAF for airlines, therefore they’ll likely continue to use the minimum required by regulations. So, without the ability to compete on price, it’s difficult for the entire value chain of SAF to demonstrate viability.
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IBA サステナビリティ・ウォッチへようこそ 2023年8月 環境・社会・ガバナンス（ESG）問題は、今や航空投資における重要なリスクと見なされており、世界中の当局が透明性の向上と報告基準の厳格化を求めている。ネット・ゼロ・エミッションへの道筋と、それが航空業界全体のすべての主要企業に与える現実的な影響を理解することが、かつてないほど重要になっています。IBAのESGコンサルティングチームは毎月、成長し続ける航空業界のサステナビリティにかんする重要な洞察と最新ニュースをお伝えします。
Environmental, Social, and Governance (ESG) issues are now seen as a key risk to investments in aviation, and authorities across the world are demanding more transparency and stricter reporting standards. It’s never been more important to understand the pathways to net-zero emissions, and their real term impacts on all key players across the industry. Each month, IBA’s ESG Consulting team will be sharing key insights and the latest news from the growing world of sustainable aviation.